Texas House Bill HB3021

Texas 2009 - 81st Regular

Caption

Relating to the interest and fees that may be charged for certain consumer loans; providing a criminal penalty.

Impact

The proposed legislation would significantly amend the Finance Code governing consumer lending, particularly impacting lenders that offer unsecured loans. By establishing a clear maximum interest rate and standardized calculation methods, HB3021 seeks to protect borrowers from excessive charges that may arise from predatory lending practices. This change could reshape the lending landscape by encouraging more responsible lending among financial institutions while providing borrowers with clearer expectations of their repayment obligations.

Summary

House Bill 3021 aims to establish new regulations regarding the interest and fees that may be charged for certain consumer loans in Texas. Specifically, the bill introduces a cap on the annual interest rate for unsecured loans, limiting it to a maximum of 30%. Additionally, it mandates how these charges are to be calculated, ensuring that they reflect the unpaid principal balance only, which excludes other service charges. The bill's provisions are designed to enhance transparency and fairness in consumer lending practices, particularly for less affluent borrowers who often rely on such loans.

Contention

Despite its consumer protection goals, the bill has faced contention from various stakeholders, particularly from lenders who argue that the imposed interest cap could limit their ability to compensate for the risks associated with lending to high-risk individuals. Opponents of the bill from the lending community express concerns that this measure could lead to reduced access to credit for vulnerable populations, who may be unable to obtain loans under the new restrictions. Advocates for consumer rights, however, contend that the current rates charged by some lenders are exploitative and necessitate regulatory intervention to ensure fair lending practices.